Aprivate banker can offer an excellent
partnership by designing a financial
plan for a business life cycle, says Mary Ann Stropkay, senior vice president
of FirstMerit Bank. Bankers provide the
opportunity to depersonalize the financial
aspects of your life and business. They help
manage risks by offering an objective view
of how to start a business and help it grow.
Personal and professional priorities and
goals should be determined with a private
banker, as well as a plan designed to
achieve the desired result. The private
banker’s expert opinion can help you determine answers to questions you may have
overlooked. A good banker will revisit the
plan every year. The plan will change
throughout its life cycle and should be
adjusted accordingly, says Stropkay.
Smart Business spoke with Stropkay
about the life cycle of a business and how
a banker can help design a financial plan
for each stage.
How can a private banker help you plan for
the stages of a business/personal life cycle?
The four stages are creation, growth and
development, maturing and investing, and
retirement and distribution.
During the creation state, a banker should
be consulted as soon as possible to discuss
lending opportunities. At this stage, a
banker should offer funding suggestions
and provide investment and financial plans
for growth. Bankers will discuss cash planning and expenses. They will take a realistic, objective look at your new business.
Development and growth strategies need
to be outlined. As a business owner, you
must determine where you will get the
funds to start. There are many resources
for funds, such as a financial lender, family,
friends or personal assets.
During the growth/development stage,
you begin to acquire wealth. A private
banker will help design a plan for profit. A
tough question for many business owners
is, ‘Should I reinvest profit into my business or should I start saving for my personal needs?’ Each situation is different,
but a private banker can help you find the
correct answer.
Bankers also can help you locate outside
investors who may be interested in your
new business. ‘Angel’ investors often look
for small businesses in which to invest
money, enabling the company to grow.
These investors often use banks and
bankers as a contact for new ideas. Private
bankers can point them in your direction.
At the maturing/investing stage, a banker
should help diversify your risks. Your No. 1
asset besides your home will be your business. You have to plan for failure. In the
event something happens to the business,
what would you do? A private banker
should supply different options and levels
of risk and security. You should review
these options with the banker regularly to
make sure they still fit your needs.
At the retirement/distribution stage, business succession planning is necessary. A
banker can help you look objectively at the
future of the business to determine the
best course of action. A banker will ask
tough questions that must be answered,
like ‘Will the business go to the family or to
a business partner?’ It often is beneficial to
consult a specialist for an evaluation about
the future of the business.
This stage is emotional, so an adviser is
necessary to offer an objective view. Estate planning is crucial, and your family must
be aware of the plan.
What should a business owner look for in a
banker?
You want to work with a seasoned lender.
The person should be an expert but doesn’t
have to possess all the answers. A banker
should be comfortable bringing in experts
to provide the service you require.
The bank is just as important as the
banker. You need to look for a team that
will serve your business and personal
needs, even though team members may
change as you evolve in the life cycle.
The more informed your advisory team
is, the better. The team should have key
partners, such as an attorney, a CPA and a
banker. Preferably, team members should
know each other and have regular conversations about the business and the plan.
The banker should understand the family
and the emotional makeup. You want
someone to guide you down the path to
your dreams.
What are the common mistakes made when
developing a plan for your business and personal future?
Most people do not plan far enough in
advance. The problem is business owners
believe they cannot fail. They would not
have taken on the risk unless they were
self-confident enough to believe they were
going to be successful. Everyone must
have an exit plan in case a business does
not succeed.
The biggest risk is they are not seeing
their businesses as separate from their
lives. At the beginning stages of a business,
you may not have a choice. But the two
plans should become separate as soon as
there is enough profit.
You will not have enough for retirement if
you keep reinvesting in the business. You
must be realistic. Let a banker review the
plan and your goals and help you determine where new profit should be invested.
MARY ANN STROPKAY is senior vice president of FirstMerit
Bank. Reach her at (330) 384-7877.